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Govt panel recommends 100% FDI in telecom & aviation sectors

19 Jun 2013 Evaluate

In a move to attract more capital flows and tide over the Current Account Deficit (CAD) woes along with bolstering the rupee, a government panel, headed by economic affairs Secretary Arvind Mayaram, has proposed raising FDI cap in a number of sectors, including non-scheduled air transport, ground handling at airports, satellites, private security agencies and Internet Service Providers (ISPs).

The panel has suggested that the Foreign Direct Investment (FDI) ceiling in the defence sector be raised to 49% under the government approval route from 26% at present, while for the pharmaceuticals sector; the committee recommended 49% under automatic route as against 100% under the government approval route. The panel has also suggested raising the foreign direct investment (FDI) limit to 74% in multi-brand retail and allowing complete foreign ownership of telecom and aviation companies.

The panel has submitted the report to the Finance Ministry and now, the Department of Industrial Policy & Promotion (DIPP), the administrative ministry in charge of FDI policy, will consider the Mayaram Committee report to finalise the plan.

Foreign investment is considered crucial for economic development of a country and India has allowed FDI in most of the sectors through automatic route, but for certain sensitive sectors, FIPB clearance is required. For the fiscal 2012-13, FDI inflows recorded a decline of 38% to $22.42 billion compared to the $35.12 billion inflow in the previous year. Meanwhile, the government has been liberalizing the foreign investment policy to attract maximum foreign investment into the country.

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